Corporate Organization Disadvantages - Answers Taxation on corporate income, double taxation on
dividends.
Financial Management Goal - Answers To make money or add value for owners.
Agency Relationship - Answers The relationship between shareholders and management. Principal hires
agent, potential conflict of interest leads to agency problem.
Agency Costs - Answers Costs of shareholder-management conflicts, can be indirect or direct.
Corporate Social Responsibility (CSR) - Answers Company commitment to sustainable operation,
influences investor decisions.
Money vs Capital Markets - Answers Money markets for short-term debt, capital markets for long-term
debt and equity.
Primary vs Secondary Markets - Answers Primary markets for original securities sale, secondary markets
for subsequent trading.
Net Working Capital Calculation - Answers Difference between current assets and liabilities.
Liquidity vs Net Working Capital - Answers Liquidity is asset cash conversion ease, net working capital
includes more liquid assets.
, Market Value vs Book Value - Answers Market value is current price, book value is asset value on
balance sheet.
Liquidity - Answers Ease of converting assets into cash
Net Working Capital - Answers Current assets minus current liabilities
Market Value - Answers Price at which assets are traded
Book Value - Answers Accounting value of assets
Operating Cash Flow - Answers Cash flow from day-to-day activities
Capital Spending - Answers Net spending on fixed assets
Net Working Capital Change - Answers Change in current assets over liabilities
Cash Flow from Assets - Answers Sum of cash flow to bondholders and shareholders
Average Tax Rate - Answers Tax bill divided by taxable income
Marginal Tax Rate - Answers Extra tax on one more dollar earned
Capital Cost Allowance - Answers Tax depreciation in Canada
Half-Year Rule - Answers Tax rule impacting CCA claims
Terminal Loss - Answers A positive UCC balance remains when the adjusted cost of disposal is less than
UCC before the sale.
Recaptured Depreciation - Answers A negative UCC balance occurs when the adjusted cost of disposal
exceeds UCC in the pool. The company must pay tax at its ordinary tax rate on this balance.
Sources of Cash - Answers Activities bringing in cash. a decrease in an asset account or an increase in a
liability (or equity) account is a source of cash.
Uses of Cash - Answers Activities spending cash. An increase in a left-hand side (asset) account or a
decrease in a right-hand side (liability or equity) account is a use of cash.
Common-Size Statements - Answers Financial statements in percentage terms
Common-Base-Year Statements - Answers Statements relative to a base year amount
Financial Ratios - Answers Relationships from financial information
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